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Advantages and Disadvantages of Position Averaging

Averaging is a situation in which a trader does everything in order to avoid losses, opening new deals against an existing trend, waiting for its correction. Many are convinced that averaging is a very effective way to reduce losses during trading operations. Yes, the competent actions of the trader really allow you to minimize losses, as well as receive a certain plus. But a very negative scenario is also possible - in such a situation, the trader may face high losses. We will deal with the practicality of using averaging and the correctness of its implementation.

Forex Averaging Nuances

The method is quite universal, so it can be used on all available trading strategies. This is a very high-quality alternative to stop loss, there are certain similarities with the Martingale principle, the difference is only in the absence of a doubling of the lot when creating new positions.

We will deal with the main essence of tactics. Using his own trading system, the trader opens a specific deal. Take profit will work if the price moves in the necessary direction. The operation turns out to be profitable, the merchant just has to wait for the next signals to enter the market. This will continue until the moment the quotes are in the opposite direction from the open order. In this case, we do not use Stop Loss.

Where there should be a stop order, the trader sets a pending order, the direction of which corresponds to the previous one. Take profit is shifted to the middle of the distance between these orders. If a price refund occurs, the transaction is closed at take profit, the trader does not get profit, but does not incur losses.

Advantages and disadvantages of averaging

We’ll deal with the benefits first. It should be noted immediately that there are much more minuses in this situation. Consider the main advantage of averaging, which many consider the only one - the trader gets an excellent opportunity to compensate for unsuccessful transactions, complete them with minimal losses. But we note that this is only an opportunity - no one guarantees that everything will go perfectly and according to your plan. And here comes the time for shortcomings.

Let's just assume that the order was opened at the peak of the upward movement. After 1200 points, a second order was opened, take profit set.

It is still impossible to open 3 deals, because you need to ensure the same distance between orders, take profit has not yet been achieved, there is no certainty that it will be achieved. If the price continues to decline, the trader will open new positions in order to achieve a possible averaging.

The indicators of floating loss will grow inexorably, you cannot assume whether the price can roll back to the level necessary for averaging, so there is no guarantee of the success of such a transaction. The risk is hardly justifiable. The averaging method can be used only by highly experienced traders who clearly determine the beginning / end of a trend, its correction and duration. But if you are such an experienced specialist, you may not need any averaging.

Averaging Automation

Tracking each pending order on your own is very difficult, so it is recommended that you use special automated software. For example, the development of a special expert advisor (EA) ( https://nordman-algorithms.com/metatrader-programming/ ) that will perform these functions. This is a special expert advisor that makes life easier for the trader. Such an expert advisor allows you to close deals, if the required level is reached, place orders at the required distances. You are developing an expert advisor that can be customized to your needs, but you can’t leave the system unchecked, this will avoid certain problems.

Consider a situation with a long trend, without corrections. The EA will create new orders using your funds. This will entail losing trades and a substantial loss. Therefore, it is necessary to provide full control over the work of the expert advisor you developed.

Averaging, a very specific way of trading that is suitable only for professionals. Beginners can face pitfalls and quickly lose their entire deposit.

#forex #forex trading #forex tutorial #expert advisor

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What are the features of trading on a demo account?

A demo account is a trading account where you can trade virtual money. There are many reasons to always have a training demo account on hand, and I highly recommend that you create one if you don't already have one.

Many novice traders often wonder when to start trading for real money. The answer to this question entirely depends on the experience gained in trading. How can I get this experience? The answer is obvious - using trading on a demo account.

Trading on a demo account

Many people underestimate trading on a demo account, believing that trading for fake money does not make much sense. However, this is a fallacy. Trading on a demo account is an integral component of the success of any trader.

Trading is always a long-term job. Many traders are often extremely enthusiastic and optimistic when they just start their trading. However, after a year, most of them lose their distance and are disappointed in trading. Why it happens? Because the majority loses money and decides that trading is not for them.

However, there are simple steps you can take to avoid this situation. And trading on a demo account is the most important step. Demo trading will save you time and money.

Despite the fact that you cannot reproduce the experience gained in trading with real money, you can get a number of benefits from demo trading.

Many of us have ever gone in for sports or continue to practice. And, as athletes confirm, they spend most of their time in training. For example, football players spend 80% or more of their time playing on the training field, trying to improve the process, which ultimately hones the necessary skills for a real game.

Having a demo account gives a trader many advantages:

Trading on a demo account takes place with virtual money, so you can trade without risking your real money.

This is an opportunity to check the trading conditions of your broker, for example, order execution speed, margin, commission, lack of requotes and slippages.

You can test your scripts and advisers. It is always recommended to test them on a demo account before starting a script or adviser on a live account. After all, you do not want your adviser to open and close orders, while losing your money? Running on a demo account will help you find errors in the code and eliminate them.

This is an opportunity to test your trading strategy before using it on a live account. For this purpose, you can also use tester, which will allow you to test your strategies on historical quotes.

However, there are some differences between a live trading account and a demo account:

Trading psychology when trading with virtual money is different from trading with real money. You will not feel the same risks, therefore, your trade will be completely different.

To test your strategy on a demo account, you will need to spend a lot of time, especially if you trade on higher timeframes.

The execution of orders may differ on the demo account compared to the real account. A demo account has the same settings as a real account in terms of trading conditions, but usually it is placed on another broker server.

#forex #forex trading #forex tutorial

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How to Develop Your Own Forex Trading Strategy?

Today, Forex employees are offered numerous strategies and tactics for profit.

But there are also some problems when conducting trading on them. There are several reasons for this - there are strategies that work on a strictly defined currency pair. There are strategies that are conventionally called copyright (this means that someone independently developed a strategy specifically for themselves).

In addition, even the tactics of conducting a strategy is a purely individual process. As experienced traders note, the best option in this case is considered to be your own developed trading strategy.

There are some tips on how to properly develop your trading tactics:

1. Do not think that you will build a strategy from scratch. You can take any strategy and make such changes as you see fit. As innovations, you can add indicators, remove them, choose a different time interval, check the work of the strategy on several different currency pairs, etc.

Experienced developers recommend calculating or experimentally selecting an entry point into the market, looking for confirmation of additional signals and everything that you consider necessary.

2. Try to combine several different strategies into one.

3. Pay attention to the news that is published: you can find a lot of useful and valuable information in them. There is a general trend - if important news, for example, of a macroeconomic plan, are being prepared for publication, then you should not make a deal. A sign of the appearance of an important event is the so-called “market fever”.

4. Conduct a market analysis for yourself at the end of each month (preferably at the end of each week). Everyone is trying to close deals before the weekend, so you will not always be able to calculate all your moves at this time.

5. Be sure to work with those orders that will limit your losses. This is convenient if you accidentally miss a signal to exit the market.

6. Before deciding to apply your strategy in real-time mode, be sure to check its performance on a demo. As a rule, you should check your calculations on at least three dozen transactions.

Remember that a self-developed strategy will give you the opportunity to quickly change the tactics of bidding and correct all previously made mistakes.

After a complete description of the strategy is drawn up, automate it yourself or using the services of MQL4 and MQL5 programmers (https://nordman-algorithms.com/metatrader-programming/ ). When an expert advisor on your strategy is created, you can start testing the strategy on a story or demo account.

#forex #forex trading #forex tutorial #trading strategy #expert advisor

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Main Situations in Which it is More Correct to Postpone Forex Trading

1. In no case do you need to trade when there is no clear confidence in the appropriateness of this action.

As practice shows, more profit can be achieved if the transaction is concluded spontaneously, that is, without hesitation. Everything happens quickly, just inspected the schedule and instantly decided. One gets the impression that successful traders themselves find the trader. A swift clarification came to my head and all doubts that were present receded far into the background. Now you just need to take your profit. When the situation is different and there are big doubts that you have to drag yourself to the opening of this transaction by dragging, then it is most correct to refuse such a trade.

2. It is not necessary to conclude a deal when the market situation does not coincide with the trading plan that is used.

This situation, as a rule, is not considered in the process of training in Forex trading. In addition, not in every educational literature it is also possible to find it. If you look at the situation quite soberly and realistically, without using this recommendation, trading will be more chaotic. When the trading process is conducted exclusively according to the trend, then in this case it is highly undesirable to conduct experiments and create transactions, guided by bounces from support / resistance levels. All traders are very familiar with the trading systems used and there is no reason to deviate from their observance, as they have repeatedly passed the test and know that with their help it is possible to achieve a systematic income. It is most correct in this to wait for that moment until the maximum optimal signal arises. In the event that the current market situation does not correspond to the trading strategy that is used by the trader, it is most correct to simply postpone all actions until the next trading day. Everything is developing on the market, so everything will be able to trade anyway.

3. It is highly undesirable to start conducting the trading process if you are unable to complete the entry to the market on time.

It is only natural that a person engaged in trading would not be so free that he is physically unable to continuously sit at the monitor. Many people are familiar with the situation when for some reason it suddenly turns out that the most optimal moment of closing a deal is missed and in such a situation most often the trader does everything possible to try to make it, that is, to catch up. Here you can only recommend that you stop doing something, and generally postpone trade. In no case should you jump into the last car of a departing train, since after that another will come to the station and it is into it that the trader will be able to sit quietly without any hurry. In this case, the trader with his attempts to catch up with the cost, as well as try to enter the market when a moment is missed, only exacerbates an already difficult situation. Keeping track of all the sets is just something fantastic and incredible. When it was not possible to catch up with one set or another, you just need to wait until another appears. Believe that there are a huge number of different opportunities on the market and everyone will find the most suitable for him.

#forex #forex trading #forex tutorial

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Top 5 Forex Money Management Rules

Money management is a system of risk management rules in the Forex market. Simply put, this is a set of clear recommendations, following which you can minimize the risk of drawdown or loss of deposit.

1. Deposit drawdown risk of not more than 5% This is one of the main, basic rules of money management, which experienced traders begin to tell beginners in the first place. Whenever opening a deal, one must ask the question: “How much can you afford to lose?” In the case of Forex, the answer should be: no more than 5% of the current deposit.

The risk of loss is insured with a simple tool called stop loss. It must be installed not intuitively, but in accordance with 2 rules:

Technical analysis of the market - above / below the nearest maximum / minimum, exit from the channel, support or resistance level. Money management calculation - the maximum loss in the event of a price reversal is not more than 5% of the current deposit. For example, if the balance is now $ 1000, the total loss should not exceed $ 50.

Note! Stop loss must always be set, even when the price is far gone in the right direction. The market is unpredictable, so the probability of an unexpected reversal, although small, is not at all excluded.

2. Trailing Stop Application This is another convenient tool that can significantly reduce losses in the event of an unpredictable price reversal. For example, the price went up, and after it has passed a certain distance, a trailing stop raises the stop loss by an appropriate number of points (from 15 to 715, according to the user's choice).

Now, even if the asset goes down, it will face an updated level, and then the loss will be significantly less. It turns out that trailing stop is a dynamic stop loss. It allows you to automatically control the potential loss, minimizing losses.

Trailing Stop is used in almost all programmable expert advisors. MQL Developers often include this feature in the default expert advisor - https://nordman-algorithms.com/metatrader-programming/

3. Leverage no more than 1: 100 Leverage is the borrowed funds that a broker provides to a trader to open Forex positions. For example, if the user chose a leverage of 1: 200, this means that the amount of credit from the broker is 200 times higher than the trader’s own balance.

Leverage can and should be used (a correctly taken loan helps to develop both in life and in Forex). However, as in all other cases, it is necessary to adhere to clear rules:

The maximum shoulder size is 1: 100 - this is quite enough according to the experience of different generations of traders. At the same time, brokers will offer 1: 200 and even 1: 500 - such offers should be ignored. The maximum risk of drawdown from 1 transaction is 5% of the current deposit amount. In other words, if the price has reversed, you should not rely on the shoulder. Otherwise, the entire balance will be lost, and such cases are not uncommon. To avoid this, you must use the already described stop loss tool.

4. Reasonable minimum deposit Many brokers have no or little deposit restrictions - for example, $ 100 or $ 200. Therefore, novice traders quickly open an account, place almost the entire amount and in 90% of cases, drain the balance. The reason is obvious - the basic rule of money management has been violated (maximum risk of losing 5% of the current balance).

To clearly observe this ratio, you must either replenish the balance by a large amount, or open a cent account:

mini - 0.1 from the whole lot; micro - 0.01 from the whole lot.

5. Take profit in small parts Many users enter the market only in the most profitable, as they think, cases when the price passes, for example, 100-200 points or more.

However, they do not consider situations in which the movement of the currency is weak, i.e. the potential profit taking into account the spread will be only 20-30 points. And in anticipation of a favorable moment, they begin to lose hours, days and weeks. In fact, this approach will lead to even greater losses. Therefore, you need to try to trade on both large and small trends.

For reference. There is a whole group of trading strategies based on obtaining a small but almost guaranteed profit of a few points. They are called scalping. The essence of the approach is that every day several positions are opened at once, due to which even a small profit in total brings tangible income.

#forex #forex trading #expert advisor #trading strategy

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What is a Forex Gap?

All traders periodically encounter such a phenomenon as a price gap or another gap. Gaps are found in all financial markets and most often appear on Monday, at the opening of the market. In this post we will analyze what a gap is, what types they share and why they appear.

What is a gap?

Gap is a quote gap on the chart, defined as a significant shift of the opening price of a new bar from the closing price of the previous bar. Technically, this price gap can appear on any period: from minute to weekly timeframes.

You can see the gap only on charts where the opening and closing prices of periods are displayed. And there are two types of charts: bars and candlesticks. On all other types of charts, price gaps are not displayed, since they are built mainly on the closing price (lines, ticks, renko, etc.).

A gap can occur at any time, but the gap formed during the weekend is considered the most significant. That is a gap between the market closing price on Friday and the market opening price on Monday. The frequency of formation of such gaps depends on market volatility.

Reasons for price gaps The main reason for the formation of a price gap is a sharp change in the balance between supply and demand. The appearance of a large number of buy or sell orders without counter orders creates a liquidity shortage and shifts the current price, thereby balancing the balance.

The culprits of the instant shift of the balance are large urgent orders and triggering of the accumulation of volumes at some price levels. And if the broker does not have enough liquidity in this range, then there is a gap.

There are several main causes of the gap:

publication of economic news;

the publication of important economic indicators, especially noticeable when real indicators are very different from expected;

man-made accidents and natural disasters;

accumulated volumes at the joints of sessions and periods (week, month, year)

Types of price gaps The following main types of gaps can be distinguished on forex:

Common Gap - a price gap accompanied by a small trading volume, indicating a low interest at this time in this asset. Usually simple gaps appear in the middle of a trading session or in a calm market. They close quickly, without any subsequent market impacts and therefore do not represent any interest.

Breakaway Gap is a price gap formed during the trend. With a rapid trend, often several such gaps are formed, following one after another. This type of price gap can be attributed to significant ones, and its appearance indicates that the trend will continue. The price movement does not meet resistance and at every strong price level it jumps in a gap. As a rule, these gaps are not filled, and when you try to fill it, the price encounters strong resistance or support at the base of the gap.

Runaway Gap - in essence, this is the same as a gap gap, but without a significant price level breakthrough. It is formed mainly in the middle of the trend and has a high trading volume. The formation of this price gap means that the trend is strong and is likely to continue.

Exhaustion Gap - signals the end of the trend and its imminent reversal. The price gap can be called an exhaustion gap if it has a high trading volume and formed after a protracted movement.

Gap Trading The classification described above reveals the essence of the price gap, but this is not enough for accurate identification and subsequent actions. For example, the acceleration gap can be easily confused with the exhaustion gap and, as a result, mistakenly enter the market.

When working with price gaps, it is necessary first of all to analyze the causes of their appearance, to determine the general mood of the market. Analyze how a hep relates to strong support and resistance levels. And only after that we can conclude what type it belongs to and whether it is worth opening a position. It should be remembered that the gap sometimes turns into a market panic without a clear direction.

Do not leave pending orders on Friday, hoping to catch a good move on Monday. If the pending order is in the gap, then at best it will not work, and at worst, it will be executed at an unprofitable price. The same applies to stop loss of positions, if stops fall into the gap, the position will be closed at the first available price. And as we understand it, closing will occur at a disadvantageous price for the trader.

In most cases, the gap on Monday closes, that is, the price returns to the closing price of Friday. And this pattern can be used in your trade, but again we repeat, only after a thorough analysis of the market.

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